(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

3111 C Street

Anchorage, Alaska 99503

(Address of principal executive offices)(Zip Code)

(907) 562-0062

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ⁬

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ⁬

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

These consolidated financial statements should be read in conjunction with the financial statements, accompanying notes and other relevant information included in the Northrim Bancorp, Inc’s Annual Report on Form 10-K for the year ended December 31, 2011.

The accompanying unaudited consolidated financial statements have been prepared by Northrim BanCorp, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with instructions to Form 10-Q under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain reclassifications have been made to prior year amounts to maintain consistency with the current year with no impact on net income or total shareholders’ equity. The Company determined that it operates as a single operating segment. Operating results for the interim period ended June 30, 2012, are not necessarily indicative of the results anticipated for the year ending December 31, 2012. These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

The Company’s significant accounting policies are discussed in Note 1 to the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

In May 2011, the Financial Accounting Standard Board (“FASB”) issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). Some of the amendments contained in ASU 2011-04 clarify the FASB’s intent about the application of existing fair value measurement requirements, and other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This ASU was effective for the Company’s financial statements for annual and interim periods beginning on or after December 15, 2011, and has been applied prospectively. The adoption of this standard did not have a material impact on the Company’s consolidated financial position or results of operations.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 amends Topic 220, “Comprehensive Income”, to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income, nor does it change the option for an entity to present components of other comprehensive income either net of related tax effects or before related tax effects. In December 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date for Amendments to Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update 2011-05 (“ASU 2011-12”). This ASU defers only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments. ASU 2011-12 was issued in order to allow the FASB time to redeliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. While the FASB is considering the operational concerns about the presentation requirements for reclassification adjustments and the needs of financial statement users for additional information about reclassification adjustments, the Company will continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before the issuance of ASU 2011-05. ASU 2011-12 was effective for the Company’s financial statements for annual and interim periods beginning after December 31, 2011, and has been applied prospectively. The adoption of this standard did not have a material impact on the Company’s consolidated financial position or results of operations.

3. Cash andCashEquivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest-bearing deposits with other banks, banker’s acceptances, commercial paper, securities purchased under agreement to resell, federal funds sold, and securities with maturities of less than 90 days at acquisition.

8

4.InvestmentSecurities

The carrying values and approximate fair values of investment securities at the periods indicated are presented below:

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Fair Value

(In Thousands)

June 30, 2012

Securities available for sale

U.S. Treasury and government sponsored entities

$

119,002

$

504

$

3

$

119,503

Municipal securities

18,970

699

1

19,668

U.S. Agency mortgage-backed securities

47

3

-

50

Corporate bonds

46,518

515

186

46,847

Preferred stock

3,037

142

-

3,179

Total securities available for sale

$

187,574

$

1,863

$

190

$

189,247

Securities held to maturity

Municipal securities

$

3,601

$

242

$

-

$

3,843

Total securities held to maturity

$

3,601

$

242

$

-

$

3,843

December 31, 2011

Securities available for sale

U.S. Treasury and government sponsored entities

$

160,529

$

625

$

50

$

161,104

Municipal securities

16,260

675

-

16,935

U.S. Agency mortgage-backed securities

52

2

-

54

Corporate bonds

43,767

343

1,119

42,991

Preferred stock

996

3

-

999

Total securities available for sale

$

221,604

$

1,648

$

1,169

$

222,083

Securities held to maturity

Municipal securities

$

3,819

$

258

$

-

$

4,077

Total securities held to maturity

$

3,819

$

258

$

-

$

4,077

June 30, 2011

Securities available for sale

U.S. Treasury and government sponsored entities

$

137,256

$

874

$

4

$

138,126

Municipal securities

14,023

379

-

14,402

U.S. Agency mortgage-backed securities

58

2

-

60

Corporate bonds

29,553

785

48

30,290

Total securities available for sale

$

180,890

$

2,040

$

52

$

182,878

Securities held to maturity

Municipal securities

$

5,142

$

196

$

-

$

5,338

Total securities held to maturity

$

5,142

$

196

$

-

$

5,338

The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. There were five securities with unrealized losses as of June 30, 2012 and 2011, respectively, that have been in a loss position for less than twelve months. There were no securities with unrealized losses as of June 30, 2012 and June 30, 2011 that have been in an unrealized loss position for more than twelve months. Because the Company does not intend to sell, nor is it required to sell these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

At June 30, 2012, $33.2 million in securities, or 17%, of the investment portfolio was pledged, as compared to $32.1 million, or 14%, at December 31, 2011, and $24.2 million, or 13%, at June 30, 2011. We held no securities of any single issuer

9

(other than government sponsored entities) that exceeded 10% of our shareholders’ equity at June 30, 2012, December 31, 2011 or June 30, 2011.

The amortized cost and fair values of debt securities at June 30, 2012, are distributed by contractual maturity as shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Although preferred stock has no stated maturity, it is aggregated in the calculation of weighted average yields presented below in the category of investments that mature in ten years or more.

Amortized Cost

Fair Value

Weighted Average Yield

(In Thousands)

US Treasury and government sponsored entities

Within 1 year

$

29,996

$

30,034

0.76

%

1-5 years

89,006

89,469

0.73

%

Total

$

119,002

$

119,503

0.74

%

U.S. Agency mortgage-backed securities

5-10 years

$

47

$

50

4.45

%

Total

$

47

$

50

4.45

%

Corporate bonds

Within 1 year

$

3,160

$

3,195

2.88

%

1-5 years

43,358

43,652

2.45

%

Total

$

46,518

$

46,847

2.48

%

Preferred stock

Over 10 years

3,037

3,179

5.88

%

Total

$

3,037

$

3,179

5.88

%

Municipal securities

Within 1 year

$

2,414

$

2,422

1.79

%

1-5 years

9,897

10,137

2.01

%

5-10 years

7,305

7,776

4.58

%

Over 10 years

2,955

3,176

4.79

%

Total

$

22,571

$

23,511

3.18

%

The proceeds and resulting gains and losses, computed using specific identification, from sales of investment securities for the six months ending June 30, 2012 and 2011, respectively, are as follows:

Proceeds

Gross Gains

Gross Losses

(In Thousands)

2012

Available for sale securities

$

30,424

$

273

$

-

2011

Available for sale securities

$

6,987

$

263

$

-

A summary of interest income for the six months ending June 30, 2012 and 2011 on available for sale investment securities is as follows:

2012

2011

(In Thousands)

US Treasury and government sponsored entities

$

553

$

816

U.S. Agency mortgage-backed securities

1

1

Other

630

482

Total taxable interest income

$

1,184

$

1,299

Municipal securities

$

283

$

235

Total tax-exempt interest income

283

235

Total

$

1,467

$

1,534

10

For the periods ending June 30, 2012, December 31, 2011 and June 30, 2011, we held Federal Home Loan Bank of Seattle (“FHLB”) stock with a book value approximately equal to its market value in the amount of $2.0 million for each period. The Company evaluated its investment in FHLB stock for other-than-temporary impairment as of June 30, 2012, consistent with its accounting policy. Based on the Company’s evaluation of the underlying investment, including the long-term nature of the investment, the liquidity position of the FHLB of Seattle, the actions being taken by the FHLB of Seattle to address its regulatory capital situation, and the Company’s intent and ability to hold the investment for a period of time sufficient to recover the par value, the Company did not recognize an other-than-temporary impairment loss. Even though the Company did not recognize an other-than-temporary impairment loss during the six-month period ending June 30, 2012, continued deterioration in the FHLB of Seattle’s financial position may result in future impairment losses.

5. LoansHeldforSale

The Company has purchased residential loans from our mortgage affiliate, Residential Mortgage Holding Company LLC (“RML”), from time to time since 1999. The Company then sells these loans in the secondary market. The Company purchased $86.6 million and sold $91.8 in loans in the three-month period ending June 30, 2012. The Company sold $5.6 million loans and did not purchase any loans in the three-month period ending June 30, 2011.

6. Loans

The composition of the loan portfolio by segment, excluding loans held for resale, is presented below:

June 30, 2012

December 31, 2011

June 30, 2011

Dollar

Percent

Dollar

Percent

Dollar

Percent

Amount

of Total

Amount

of Total

Amount

of Total

(In Thousands)

Commercial

$

240,395

36.6

%

$

252,689

39.1

%

$

232,765

36.7

%

Real estate construction

40,922

6.2

%

40,182

6.2

%

47,639

7.5

%

Real estate term

340,530

51.8

%

315,860

48.9

%

314,093

49.5

%

Home equity lines and other consumer

38,260

5.8

%

39,834

6.2

%

42,458

6.7

%

Subtotal

$

660,107

$

648,565

$

636,955

Less: Unearned origination fee,

net of origination costs

(3,257)

(0.5)

%

(3,003)

(0.5)

%

(2,825)

(0.4)

%

Total loans

$

656,850

$

645,562

$

634,130

At June 30, 2012, approximately 19% of the portfolio was scheduled to mature over the next 12 months, and 20% was scheduled to mature between July 1, 2013, and June 30, 2017.

As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends in past due and nonaccrual loans, gross and net charge offs, and movement in loan balances within the risk classifications. The Company utilizes a risk grading matrix to assign a risk classification to each of its loans. Loans are graded on a scale of 1 to 8. A description of the general characteristics of the eight risk classifications are as follows:

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·

Risk Code 1 - Excellent: Loans in this grade are those where the borrower has substantial financial capacity, above average profit margins, and excellent liquidity. Cash flow has been consistent and is well in excess of debt servicing requirements. Loans in this grade may be secured by cash and/or negotiable securities having a readily ascertainable market value and may also be fully guaranteed by the U.S. Government, and other approved government and financial institutions. Loans in this grade have borrowers with exceptional credit ratings and would compare to AA ratings as established by Standard & Poor's.

·

Risk Code 2 – Good: Loans in this grade are those to borrowers who have demonstrated satisfactory asset quality, earnings history, liquidity and other adequate margins of creditor protection. Borrowers exhibit positive fundamentals in terms of working capital, cash flow sufficient to service the debt, and debt to worth ratios. Borrowers for loans in this grade are capable of absorbing normal economic or other setbacks without difficulty. The borrower may exhibit some weaknesses or varying historical profitability. Management is considered adequate in all cases. Borrowing facilities may be unsecured or secured by customary acceptable collateral with well-defined market values. Additional support for the loan is available from secondary repayment sources and/or adequate guarantors.

·

Risk Code 3 – Satisfactory: Loans in this grade represent moderate credit risk due to some instability in borrower capacity and financial condition. These loans generally require average loan officer attention. Characteristics of assets in this classification may include: marginal debt service coverage, newly established ventures, limited or unstable earnings history, some difficulty in absorbing normal setbacks, and atypical maturities, collateral or other exceptions to established loan policies. In all cases, such weaknesses are offset by well secured collateral positions and/or acceptable guarantors.

·

Risk Code 4 - Watch List: Loans in this grade are acceptable, but additional attention is needed. This is an interim classification reserved for loans that are intrinsically creditworthy but which require specific attention. Loans may have documentation deficiencies that are deemed correctable, may be contrary to current lending policies, or may have insufficient credit or financial information. Loans in this grade may also be characterized by borrower failure to comply with loan covenants or to provide other required information. If such conditions are not resolved within 90 days from the date of the assignment of Risk Code 4, the loan may warrant further downgrade.

·

Risk Code 5 - Special Mention: Loans in this grade have had a deterioration of financial condition or collateral value, but are still reasonably secured by collateral or net worth of the borrower. Although the Company is presently protected from loss, potential weaknesses are apparent which, if not corrected, could cause future problems. Loans in this classification warrant more than the ordinary amount of attention but have not yet reached the point of concern for loss. Loans in this category have deteriorated sufficiently that they would have difficulty in refinancing. Loans in this classification may show one or more of the following characteristics: inadequate loan documentation, deteriorating financial condition or control over collateral, economic or market conditions which may adversely impact the borrower in the future, unreliable or insufficient credit or collateral information, adverse trends in operations that are not yet jeopardizing repayment, or adverse trends in secondary repayment sources.

·

Risk Code 6 – Substandard: Loans in this grade are no longer adequately protected due to declining net worth of the borrower, lack of earning capacity, or insufficient collateral. The possibility for loss of some portion of the loan principal cannot be ruled out. Loans in this grade exhibit well-defined weaknesses that bring normal repayment into doubt. Some of these weaknesses may include: unprofitable or poor earnings trends of the borrower or property, declining liquidity, excessive debt, significant unfavorable industry comparisons, secondary repayment sources are not available, or there is a possibility of a protracted work-out.

·

Risk Code 7 – Doubtful: Loans in this grade exhibit the same weaknesses as those classified Substandard, but the traits are more pronounced. Collection in full is improbable, however the extent of the loss may be indeterminable due to pending factors which may yet occur that could salvage the loan, such as possible pledge of additional collateral, sale of assets, merger, acquisition or refinancing. Borrowers in this grade may be on the verge of insolvency or bankruptcy, and stringent action is required on the part of the loan officer.

·

Risk Code 8 – Loss: Loans in this grade are those that are largely non-collectible or those in which ultimate recovery is too distant in the future to warrant continuance as a bankable asset. This classification does not mean that the asset has

12

absolutely no recovery or salvage value, but rather it is not practical or desirable to defer charging the loan off even though recovery may be affected in the future.

·

A risk rating is assigned for each loan at origination. The risk ratings for commercial, real estate construction, and real estate term loans may change throughout the life of the loan as a multitude of risk factors change. The risk rating for consumer loans may change as loans become delinquent. Delinquent loans are those that are thirty days or more past due.

The loan portfolio, segmented by risk class for the periods indicated, is shown below: